BP

We’ve been avoiding or at least minimizing comment on the latest round of computer hacking allegedly by a special unit of the Chinese Army. However as stories have flowed in the New York Times, like this one, it is abundantly clear that the Chinese have been hacking into many of the organizations that our democracy and western economies require to operate.

In some cases the hacking goes on for many months and some organizations have let the hackers do their business to understand what the hackers are looking for and to better help them trace the intrusion back to a city block off Datong Road in Shanghai, China. There sits a twelve story building housing People’s Liberation Army Unit 61398, which does the hacking. The Chinese government has denied everything.

Look at all the oil companies in the sample. Another list could easily show tech providers like Intel, Google, Adobe and others. I think each hacking incident has its own rationale. The newspapers were hacked by the Chinese Army looking for dissident sources used by reporters in unflattering stories. One hot storyline has been about the corrupt connections between new Chinese leaders with the government trying to shut down criticism. The same was true of Google when the Chinese went after Gmail looking for email addresses of the same dissidents.

As bad as all that seems, the energy companies have my attention. It should be noted, with the vast majority of crude being controlled by national oil companies that the primary source of information about crude oil should come from the nationals themselves. Surely they could be hacked. But not so fast.

Back in the 1990’s all of OPEC did some fancy bookkeeping on their proven reserves sitting in the ground. Everyone roughly doubled the estimates of reserves they had without lifting a finger to drill another well or to do anything to actually find oil. This was prospecting on the balance sheet, shady bookkeeping. A few intrepid souls called bullpucky on the doubling but back in the 1990’s oil was cheap, the North Sea was producing at accelerating rates and casual market watchers could easily believe the fiction that there was a heck of a lot of oil in the ground.

Twenty years came and went and the North Sea is slowing down. Meanwhile the supply of crude is very tight — that’s why we’re paying nearly $4 per gallon today. If oil really were abundant relative to demand the price at the pump would be a more 1990’s-ish buck a gallon.

So, back to the Chinese. They know supply is tight and they have a vested interest in keeping the oil flowing into their expanding economy. Understanding the supply side is important to them because they have a centrally planned economy and they make demand decisions based on realistic supply options. The alternative is to brace for war which all governments do all the time. I am not the first to refer to the hacking as cyber war and it’s an apt description.

There has been an open door policy between western governments and the oil producers — Dick Cheney was the CEO of Halliburton after all and W. was a wildcatter. So the U.S. government has always had multiple good sources of information on what has been going on. Not so the Chinese. Which gets us back to hacking.

While hacking into someone else’s computer systems is not to be condoned, the bigger point is that the intellectual property — even the knowledge of production rates, their declines and proven reserves — is critical to keeping the economy functioning. It is interesting, to say the least, that our emerging adversary has such a keen interest in this information and that our free society is so blasé about it and its implications.

Last week in New York, I began some field research in social CRM that will result in a longer paper later this fall. One of the things that interested me was the level of frustration and, well, anger that some customers have for some of their vendors.

It’s a mixed bag, really — some people take great umbrage at Starbucks (Nasdaq: SBUX), others at a social networking site, and still others target their ire at oil companies, their colleges or even retailers.

In my research, there isn’t a single industry — or vendor, for that matter — that doesn’t have a group of antagonists.

This should surprise no one, but in the age of the Internet, some people might stew in their own juices over a problem or slight — either real or imagined — that happened just yesterday or one that goes back several years, but many others take action by airing their gripes online. If this is the age of transparency, it is not simply about vendor transparency — customers have a lot to say on the idea and they do.

Everyone Has Their Enemies

For part of my research, I relied on the highly subjective and unscientific international expression of annoyance and resistance to corporate affronts — I searched on the phrase “[insert name here, please] sucks.” Dear reader, I understand your delicate sensibilities, and I assure you that my interest in this research and the use of this mild form of profanity is not at all prurient — it is used in the furtherance of science. Think of me like a doctor or a photographer for National Geographic.

My reasons for beginning this quest are not germane to this piece but will be explained in the paper. Nonetheless, the more I searched, the more I realized that any company you can think of that serves the mass market has its detractors. These detractors have reached a personal level for frustration or loathing sufficient to cause them to invest many hours of their time to initiate Web sites and blogs to drive their points home and to invite others to likewise vent their frustrations.

In all but the smallest number of cases, searching on “___ sucks” brought to the screen not thousands or tens of thousands of hits but hundreds of thousands, and in many cases millions of them.

Dissatisfaction on 2 Levels

Here’s where it gets interesting. It is no surprise that some people have problems with corporations that supply them with life’s necessities. I can’t say that I have read or analyzed more than a small speck of the rants online, but after spending several hours with these for a, I feel safe in stating this preliminary conclusion: People are less dissatisfied over products or services than you might think. They are much more likely to have problems with their customer experiences.

But saying the customer experience is an issue really understates the point, which is that it appears there are at least two levels of customer experience to contend with. Moreover, it is the second level that gives many corporations agita, or at least it should.

The two levels? Thought you’d never ask.

Level One is the customer experience that the company knows about and in many cases designs around.

Level Two is the customer experience expectation that has developed in the customer’s head.

A company may not even be aware of Level Two — how could it be? It’s completely subjective. But level two is where companies falter, often badly, because of the impressions they have unwittingly encouraged to take form in their customers’ crania. More on Level Two shortly.

A simple example is all we have room for here, so it will have to suffice until the paper is ready. Note there are loads of variables in this data that are unaccounted for, and controlling for them will probably inform the work of thesis writers for the next generation. You are welcome.

Starbucks is the example. Searching on “Starbucks sucks” brought back 335,000 hits in 0.15 seconds — the number of hits seems large but broader research proves it to be middling at best. If you want some really scary numbers, try “BP Sucks” — about 2,510,000 results (0.38 seconds), according to Google (Nasdaq: GOOG), or “Facebook sucks,” clocking in at a whopping 24,300,000 results (0.19 seconds).

Case in Point: Starbucks

Reading the posts on these sites provides a clear understanding of Level Two. To be sure, there are Level One critiques of products and services — the absence of non-dairy creamer or the extra charge for soy in espresso drinks, for example. But extensive reading shows that many more of the complaints deal with Level Two and aspirations.

For instance, the reason many people patronize Starbucks’ shops is the vibe. People want to associate with Starbucks because it reflects the image they have of themselves in a Gatsby-esque way — it shows how they want to see themselves on their best hair days. They seem to see themselves as kind, ethical, caring and nurturing people.

So when Starbucks has a disagreement with African coffee growers over trademarks and the price of raw beans, people complain. They also complain about the wages and low level of tipping for the baristas and they are happy to supply reports from Oxfam on the African situation and information about a successful lawsuit over tips in Los Angeles by baristas against the chain. Two sides play this game — consider the Starbucks water brand “Ethos.”

These and many other examples of Level Two failures point out the downside of living by the customer experience. It seems to me that many large companies have taken the approach of doing their best on Level One customer experience and of working to ensure that Level Two never gets totally out of control, a laBP (NYSE: BP).

What can a company do about it? Plenty, as it turns out, but it requires a different kind of thinking and another column. Next week, part two of this piece on how to approach the Level Two customer experience.